September 17, 2025 – On September 13, the California legislature voted to reauthorize the state’s cap-and-invest program through 2045. The reauthorization puts California and Washington programs on similar timelines and ambition levels, setting the stage for a California-Québec-Washington linked market.
For Immediate Release
Contacts
Kelsey Nyland, Communications Director, Clean & Prosperous Washington
kelsey@cleanprosperouswa.com
Clayton Munnings, Executive Director, Clean & Prosperous California
clayton@cleanprosperousca.org
CA Cap-and-Invest Reauthorization a Significant Milestone Toward Linkage of California, Québec, and Washington Carbon Markets
CA Reauthorizes Cap-and-Invest Through 2045, Ambition and Net-Zero Targets Aligned with WA
September 17, 2025 – On September 13, the California legislature voted to reauthorize the state’s cap-and-invest program through 2045. The reauthorization puts California and Washington programs on similar timelines and ambition levels, setting the stage for a California-Québec-Washington linked market.
Amidst unprecedented federal retrenchment on the clean energy transition, California and Washington state lead the nation in effective, market-based climate policy that reduces pollution while growing the economy and creating jobs.
In order for carbon markets to link, their programs must closely resemble each other on key elements – notably emissions-reduction timelines, authorization horizon, and program ambition. The reauthorization of California’s cap-and-invest program ensures that alignment with Washington’s Climate Commitment Act. Linking the California-Québec-Washington markets would provide substantial near- and long-term benefits, including program durability, market stability, lower compliance costs, reduced pollution leakage risk, increased investment predictability, and the potential for enhanced collective ambition to reduce greenhouse gas emissions across jurisdictions.
“Despite federal attacks on environmental and clean energy programs, Washington and California continue to lead the nation in driving down air pollution while generating revenue to invest back into local communities,” said Michael Mann, Executive Director, Clean & Prosperous Washington. “California’s reauthorization of their cap-and-invest program is a major milestone in our collaborative efforts to link our markets, strengthen our subnational presence on the global stage, and power prosperity for all.”
“Cap-and-invest is the most affordable way to hit California’s ambitious 2030 climate target. By committing to extending the program beyond 2030, California sends an economic signal to the carbon market that our state remains wide open for businesses that reduce greenhouse gas emissions,” said Clayton Munnings, Executive Director, Clean & Prosperous California. “Legislative extension also paves the way for linkage with Washington, the completion of which will show a unified front of subnational climate action in the face of federal climate inaction.”
Figure 1: Comparison of California and Washington’s cap-and-invest programs, after reauthorization
The Washington State Department of Ecology (ECY) closed another round of linkage rulemaking on September 5, 2025. Recent draft rules reflect legislation passed during the 2025 session, including House Bill (HB) 1975, which builds resilience against carbon market volatility and takes interim action to facilitate linking with California and Québec. California’s cap-and-invest reauthorization bolsters ECY’s projections that all three markets will be linked within two years.
The California Air Resources Board will undertake a rulemaking to implement new legislative direction provided by AB 1207 and SB 840. After that rulemaking cements California’s updated program, then linkage with Washington will be pursued with a target date of linking by 2027.
By linking with California-Québec, Washington state would join the fourth-largest carbon market in the world. The World Bank released a new report on the growth of carbon pricing – particularly carbon markets like Washington and California’s – internationally. According to the World Bank, 28 percent of global emissions – including roughly half of global emissions from the power and industrial sectors – are covered by a carbon price, compared to five percent in 2005. Additionally, economies that have implemented carbon pricing make up nearly two-thirds of global gross domestic product. Nations including India, Brazil, and Turkey have publicly indicated their intention to pursue carbon markets.
Additional statements from California, Québec, and Washington leaders:
“Californians, Washingtonians, and all of us engaged in the fight against climate change will be well-served by the California Legislature’s courageous decision to reauthorize California’s foundational greenhouse gas reduction program. This is a major step forward towards our aspiration in Washington for a joint market that maximizes emissions reductions and minimizes compliance costs,” said Washington state House Majority Leader Joe Fitzgibbon.
“California’s Cap-and-Trade program is the strongest, most cost-effective emissions reduction program in the world. With the passage of AB 1207, we reaffirmed our commitment to lead the effort to fight climate change while doing it in a manner that protects Californians’ pocket books. As the representative of the Pacific Palisades – where over 5,000 homes tragically burned nine months ago – I want to also remind everyone that the cost of inaction is immeasurable,” said California Assemblymember Jacqui Irwin.
“The California Legislature’s vote this past weekend offers a strong endorsement on the carbon market and provides us a clear avenue to continue our joint efforts on possible carbon market linkage between Québec and the states of California and Washington,” said Delegate David Ruiz of the Québec Government Office in Seattle.
“This historic legislation sets the stage to formally link together two of the most effective and proven climate programs globally. California, Québec, and Washington are showing governments and communities around the world that a firm cap on pollution and investing in climate action, affordability, and quality of life works. Cap-and-invest funds clean air, clean water, reduces wildfires, restores salmon runs, provides transit, timber and agriculture community support and so much more. Our bonds in the West Coast run deep and this legislation shows that together we can continue to grow our economies with a lighter touch on the earth,” said Reuven Carlyle, former Washington State Senator, founder of Earth Finance, and Clean & Prosperous Washington board member.
“This is a win for California and for states like Washington that are taking meaningful actions to confront the impacts of climate change, support innovation, and transition our economy away from fossil fuels,” said Casey Sixkiller, Director, Washington State Department of Ecology. “Climate change remains one of the most urgent and far-reaching threats to our health, economies, and ecosystems. Tackling it requires real science, sustained commitment, and the collective strength of like-minded governments moving in lockstep toward a more resilient and carbon-free future. There has never been a more important time for states to lead on this issue, and we look forward to continuing work with California and Québec to link our carbon markets. A combined market will help businesses make long-term investments in reducing carbon pollution and building a clean energy economy.”
“It’s exciting to see California re-approve its landmark cap-and-invest program. In Washington, our cap-and-invest program is already delivering billions in climate investments, cleaner air, and good-paying clean energy jobs—proving that bold climate policy can drive both environmental and economic progress. This is yet another clear signal that West Coast states will continue to lead the transition to a clean energy future,” said James Hove, Washington Director, Climate Solutions.
Additional resources:
- Clean & Prosperous Institute’s Mapping Washington’s Climate Commitments, which features approximately 2,700 unique Climate Commitment Act-projects reflecting $4.74 billion in existing and planned spending through June 2027.
- Clean & Prosperous California’s September 8, 2025 report detailing the billions in lost cap-and-invest revenue caused by uncertainty over legislative reauthorization of the program.
- Report from the Environmental Defense Fund and Greenline Insights detailing how reauthorizing California’s cap-and-invest program will generate significant economic benefits for the state, workers, and households.
- Analysis from the Washington State Department of Ecology that finds a linked market would lead to stable, lower allowance prices and would benefit long-term program durability.
About Clean & Prosperous Washington
Clean & Prosperous Washington (CaPWA) advances smart climate policies with a strategic, data-driven approach. As champions of Washington’s cap-and-invest program, the Climate Commitment Act, CaPWA is at the forefront of reducing greenhouse gas emissions while fostering healthier communities, creating quality jobs, strengthening Washington’s global economic competitiveness, and setting a national standard for effective climate action.
About Clean & Prosperous California
Clean & Prosperous California examines carbon pricing through an economic lens by synthesizing scientific evidence from the literature and using economic thinking to produce new research. Economic thinking facilitates smart designs for California’s cap-and-trade program so that climate action can be leveraged to solve a variety of statewide problems such as the affordability crisis, devastating wildfires, and budget deficits.
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